Jo and Velma are equal owners of JV Company. Jo invests $500,000 cash in the venture. Velma contributes land and a building (basis to her of $125,000, fair market value of $500,000). The entity then borrows $250,000 cash using recourse financing and $100,000 using nonrecourse financing.
a. Determine each owner's basis in their ownership interest and their amount at risk, assuming that the venture is a general partnership.
b. Determine each owner's basis in their ownership interest and their amount at risk, assuming the venture is an S corporation.